Subscribers to Investment Advice White Letters perform security transactions at
ID: 3206414 • Letter: S
Question
Subscribers to Investment Advice White Letters perform security transactions at the rate of five trades per month. Assume that one of the subscribers performs transactions at this rate and the probability of a transaction for any two months is the same and the number of transactions in one month is independent of the number of transactions in another month.
What is the mean number of transactions per month for this subscriber?
What is the variance of the number of transactions per month for this subscriber?
What is the probability that exactly ten security transactions will be conducted in one month?
What is the probability that no security transaction will be conducted in one month?
What is the probability that fewer than five security transactions will be conducted in one month?
Explanation / Answer
= 5
(a) Mean = 5
(b) Variance = 5
(c) P(x) = (e^-)(^x) / x!
P(10) = (e^-5)(5^10) / 10! = 0.0181
(d) P(0) = (e^-5)(5^0) / 0! = 0.0067
(e) P(x < 5) = P(0) + P(1) + P(2) + P(3) + P(4)
= (e^-5)(5^0) / 0! + (e^-5)(5^1) / 1! + (e^-5)(5^2) / 2! + (e^-5)(5^3) / 3! + (e^-5)(5^4) / 4!
= 0.0067 + 0.0337 + 0.0842 + 0.1404 + 0.1755 = 0.4405